Peerless Network, Inc. et al v. MCI Communications Services, Inc. et al

Filing 270

MEMORANDUM Opinion and Order: For the foregoing reasons, the Court grants Peerless's motion for entry of final order and Rule 54(b) judgment on Counts I through V and XI 248 and awards Peerless $48,456,131.66. Signed by the Honorable Thomas M. Durkin on 7/27/2018:Mailed notice(srn, )

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UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PEERLESS NETWORK, INC., et al.,
Plaintiffs,
vs.
MCI COMMUNICATIONS SERVICES, INC.,
VERIZON SERVICES CORP., and VERIZON
SELECT SERVICES, INC.,
Defendants.

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No. 14 C 7417
Judge Thomas M. Durkin

MEMORANDUM OPINION AND ORDER
On March 16, 2018, the Court entered a Memorandum Opinion and Order
granting in part plaintiff Peerless Network, Inc.’s motion for partial summary
judgment. R. 243. Peerless then filed a motion for entry of final order and Rule 54(b)
judgment. R. 248. The parties conferred and agreed to most of the damages Peerless
sought in its motion. Before the Court are the two remaining issues—(1) whether the
statute of limitations in 47 U.S.C. § 415(a) applies to bar some of Peerless’s charges;
and (2) whether Peerless may recover compound interest on the unpaid charges. The
parties filed supplemental briefs on the two issues. R. 260, 262. The parties also filed
a stipulation agreeing to the total amount of damages owed to Peerless based on the
Court’s decision on the two issues. R. 266. For the following reasons, the Court enters
final judgment in the amount of $48,456,131.66.

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Analysis
I.

STATUTE OF LIMITATIONS
The parties first dispute whether the statute of limitations in 47 U.S.C. §

415(a) of the Communications Act bars portions of Peerless’s tariff charges. Section
415(a) imposes a statute of limitations on suits “by carriers for recovery of their lawful
charges” to two years. There is no question that Peerless is a “carrier” who seeks to
recover its “lawful charges” under its filed tariffs. 1 See Espinal v. AFNI, Inc., 2018
WL 2733366, at *9-*10 (S.D.N.Y. June 7, 2018) (explaining that “lawful charges” in
Section 415 include tariffed charges). Because Peerless filed this lawsuit on
September 23, 2014, Verizon argues that Peerless may not recover any amounts for
interstate traffic that were past due as of September 23, 2012. In response, Peerless
argues that the parties’ Standstill Agreement tolls the limitations period.
The parties entered into the Standstill Agreement on September 18, 2013.
That agreement provides that “[n]either Party shall initiate any litigation,
arbitration, regulatory action, or other proceeding seeking resolution of the Verizon
Disputes or the Peerless Demands.” R. 250-17, Standstill Agreement, § 2(f). The

In passing, Peerless argues that Section 415(a) does not apply to its claims, and
instead a four-year “catch-all” limitations period in 47 U.S.C. § 1658 applies. R. 262
at 8-9. But the case on which it relies, AT & T Corp. v. Core Commc’ns, Inc., 806 F.3d
715, 731 (3d Cir. 2015), confirms that § 415(a) “applies . . . to charges that are subject
to federal tariffing requirements.” The issue in Core Commc’ns was the statute of
limitations related to charges under a state tariff. The court chose not to address
whether the federal catch-all statute or the state statute of limitations applied,
because both were limited to four years. Id. Here, the issue is recovery of Peerless’s
charges under its federal tariff, which falls squarely in the scope of the two-year
limitations period described in § 415(a).

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interpretation of a contract is a question of law, determined by “the four corners of
the document, not to outside sources.” Kass v Kass, 91 N.Y.2d 554, 566 (1998). 2
“Where the document makes clear the parties’ over-all intention, courts examining
isolated provisions should then choose that construction which will carry out the plain
purpose and object of the [agreement].” Id. at 567. But where the “instrument was
negotiated between sophisticated, counseled business people negotiating at arm’s
length,” courts are “reluctant to interpret an agreement as impliedly stating
something which the parties have neglected to specifically include.” Vermont Teddy
Bear Co. v 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004).
Peerless argues that the Standstill Agreement operates as a tolling agreement
because the parties’ intent was to defer litigation. R. 262 at 7 (citing R. 250-17 at 1
(“[T]he Parties have determined that they wish to avoid litigation for a period of
time.”)). While the Court agrees that the parties’ general intent was to defer
litigation, the Standstill Agreement does not clearly toll the limitations period.
Indeed, it includes no mention of tolling. Peerless’s argument would require the Court
to read a non-existent tolling term into an unambiguous contract between two
sophisticated parties, which New York law prohibits. See Vermont Teddy Bear, 1
N.Y.3d at 475. Furthermore, implying a tolling agreement term would run counter to
the Agreement’s merger clause that states: “[t]his Agreement represents the entire
agreement between the Parties relating to the subject matter hereof and supersedes
any other oral or written agreements and understandings relating thereto.” R. 2502

New York law governs the Standstill Agreement. R. 250-17 § 10.
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17 § 7. The merger clause bars “any claim based on an alleged intent that the parties
failed to express in writing,” Ashwood Capital, Inc. v. OTG Mgmt., Inc., 948 N.Y.S.2d
292, 298 (N.Y. App. Div. 2012), such as an intent to toll the statute of limitations
here.
The Court recognizes the hardship of its determination that the Standstill
Agreement does not toll the statutory limitations period. But the Court finds it
difficult to incorporate a tolling provision when the represented parties did not
explicitly contract for one. While at first glance, the title “Standstill Agreement”
presumably freezes the parties and all of their rights and obligations as of the date of
the agreement, the Court is required to look at the actual language of such an
agreement. If the Standstill Agreement did nothing other than impliedly toll the
statute of limitations, this would be a more difficult decision. But the Standstill
Agreement is not worthless because of the lack of a tolling agreement. Consideration
was exchanged as part of its execution and meaningful benefits accrued to Peerless,
even if one of them was not the tolling of claims. See, e.g., R. 250-17 § 1 (amending
the tandem services agreement to include the “Wireless Termination Amendment”);
id. § 2(a)-(d).
And, it is not inconceivable that the parties’ agreement would have contained
different terms or considerations had a tolling provision been included. In fact,
Verizon suggests that to be the case, pointing to Section 2(c) of the Agreement, which
states: “Peerless Settlement Credits shall be applied first to the most recently
disputed amount, followed (if necessary) by the next most recent disputes, and so forth

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until the oldest disputes are resolved.” R. 250-17 § 2(c) (emphasis added). Verizon
argues it “specifically negotiated for this provision so that its payments would apply
to the newest invoices, allowing Verizon to clear away the older disputes as they fell
outside the two-year limitations window.” R. 260 at 8. The Court was not privy to
those negotiations and absent an ambiguous agreement, cannot read a tolling
provision into the Standstill Agreement now, despite the hardship it may cause
Peerless.
In any event, the Court finds that the limitations period in Section 415(a) could
not be tolled even if the parties had an explicit tolling agreement. In Midstate
Horticultural Co., Inc. v. Pennsylvania Railroad Co., 320 U.S. 356 (1943), the
Supreme Court considered whether a time limitation in the Interstate Commerce Act
for recovery of charges could be waived by an express agreement made before the end
of the statutory period. Id. at 357. The Court first considered Congress’s intent in
promulgating the Commerce Act, explaining that the purpose of the Commerce Act
was to impose a comprehensive scheme of regulation and to “secur[e] the general
public interest in adequate, nondiscriminatory transportation at reasonable rates.”
Id. at 361. The Court further explained that the Act required “rigid adherence to the
statutory scheme and standards” even in “matters concerning which variation in
accordance with the exigencies of particular circumstances might be permissible, if
only the parties’ private interests or equities were involved.” Id. The Court recognized
the hardship of its ruling, but concluded that the action was time-barred despite the
parties’ agreement to extend the time period. Id. at 367.

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This Court, like other courts to have dealt with the issue, reads Midstate not
to create a generally applicable rule against tolling through private agreements, but
rather as a directive to consider the legislative intent and policy purposes behind each
statute under consideration. See FDIC v. Williams, 60 F. Supp. 3d 1209, 1214 & n. 7
(D. Utah 2014) (concluding that statute setting applicable statute of limitations was
worded differently and had a different objective and policy than the Commerce Act,
and distinguishing Midstate based on its discussion regarding congressional intent);
In re Lehman Bros. Sec. & ERISA Litig., 2012 WL 6584524, at *2 (S.D.N.Y. Dec. 18,
2012) (estopping defendant from asserting time bar it had voluntarily tolled by
agreement, and finding Midstate inapplicable because its policy concerns of
uniformity and equality of treatment were not implicated).
Here, the Communications Act has both a similar purpose to and uses similar
language as the Commerce Act in Midstate. Like the Commerce Act’s purpose to
“secure the general public interest in adequate, nondiscriminatory transportation at
reasonable rates,” the Communications Act seeks to “regulat[e] interstate and foreign
commerce in communication by wire and radio so as to make available . . . to all the
people of the United States, without discrimination . . . [a] communication service
with adequate facilities at reasonable charges.” 47 U.S.C. § 151. The limitations
provisions of Section 415 also mimics the Commerce Act. The limitations provision at
issue in Midstate read: “[a]ll actions at law by carriers subject to this Act for recovery
of their charges, or any part thereof, shall be begun within three years from the time
the cause of action accrues, and not after.” 320 U.S. at 357. The provision here is

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nearly identical: “[a]ll actions at law by carriers for recovery of their lawful charges,
or any part thereof, shall be begun within two years from the time the cause of action
accrues, and not after.” 47 U.S.C. § 415(a).
The Court recognizes that courts have not ruled consistently on the issue. See,
e.g., Level 3 Commc’ns, LLC v. Illinois Bell Tel. Co., 2017 WL 3128987, at *3 (E.D.
Mo. July 24, 2017) (private agreement could toll limitations period of 47 U.S.C. § 415);
Cent. Scott Tel. Co. v. Teleconnect Long Distance Servs. & Sys. Co., 832 F. Supp. 1317,
1321 (S.D. Iowa 1993) (same); cf. In the Matter of Am. Cellular Corp. & Dobson
Cellular Sys., Inc., Complainants, 22 F.C.C. Rcd. 1083, 1093 (2007) (“[A] private
agreement to toll the limitations period, without more, simply does not meet these
narrow grounds for tolling.”) (listing cases). But the similarities between the
Commerce Act provision in Midstate and the Communications Act here—coupled
with the general agreement that the limitations period in Section 415 should be
construed strictly (see Commc’ns Vending Corp. of Arizona v. F.C.C., 365 F.3d 1064,
1075 (D.C. Cir. 2004))—convinces the Court the limitations period in the
Communications Act could not be tolled even if the parties had agreed to do so.
Nor does the Court believe the limitations period should be equitably tolled.
Equitable tolling of a statutory limitations period is allowed “only in extraordinary
and carefully circumscribed instances.” Id. It is extended “only sparingly . . . in
situations where the claimant has actively pursued his judicial remedies by filing a
defective pleading during the statutory period, or where the complainant has been
induced or tricked by his adversary’s misconduct into allowing the filing deadline to

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pass.” Id. (citing Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 96 (1990)). This is not
an extraordinary situation warranting equitable tolling. At bottom, Peerless was
represented by counsel, chose to enter into the Standstill Agreement that did not
include a tolling provision, and received consideration for its agreement to postpone
litigation. There is no evidence that Verizon lulled Peerless into entering into the
Standstill Agreement to allow the filing deadline to pass.
Nor would allowing equitable tolling in this case comport with the purpose of
Section 415. The FCC has explained that “the purpose of Section 415 is to protect a
potential defendant against stale and vexatious claims by ending the possibility of
litigation after a reasonable period of time has elapsed.” In the Matter of Am. Cellular
Corp., 22 F.C.C. Rcd. at 1089. It noted that Section 415 serves as an “absolute, nondiscretionary bar to the Commission’s consideration of tardy complaints” because a
complainant has “an affirmative obligation to exercise due diligence in preserving
[its] legal rights” as soon as it receives notice “that it might have a claim.” Id. at 1090.
Allowing equitable tolling would be inconsistent with this absolute, non-discretionary
bar.
Accordingly, Peerless may not recover amounts on its federal tariffs before
September 23, 2012. 3

This ruling has no effect on the statute of limitations that applies to Peerless’s state
tariffs, which are governed by state law. See Castro v Collecto, Inc., 634 F.3d 779, 784
(5th Cir. 2011) (rejecting Section 415(a) preemption of state statutes of limitations).
Verizon makes a cursory argument as to the limitations period for the charges billed
under the Tandem Services Agreement, R. 260 at 11, but the parties’ stipulation, R.
266, does not differentiate between these charges. Accordingly, the Court will assume

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II.

COMPOUND INTEREST
The second issue involves whether Peerless is entitled to compound interest

for Verizon’s late payments. The decision whether to award compound or simple
prejudgment interest is left to the discretion of the trial court. Am. Nat. Fire Ins. Co.
ex rel. Tabacalera Contreras Cigar Co. v. Yellow Freight Sys., Inc., 325 F.3d 924, 937
(7th Cir. 2003). Peerless’s federal tariff provides for late payment charges as follows:
If any portion of the payment is received by the Company after the date
due, or if any portion for the payment is received by the Company in
funds which are not immediately available upon presentment, then a
late payment penalty shall be due to the Company. The late payment
penalty shall be the portion of the payment not received by the date due,
multiplied by a late factor. The late factor shall be the lesser of: (a) a
rate of 1.5 percent per month; or (b) the highest interest rate which may
be applied under state law for commercial transactions. 4
Peerless FCC Tariff No. 4, §§ 3.6.2 (D). 5
Verizon does not dispute that Peerless can recover late payment charges in the
first instance. It only disputes whether Peerless can recover compound interest—i.e.
late payment charges on late payments. R. 260 at 3-5. Verizon argues the plain
language of the tariffs indicates Peerless must bill the late payment charges to
recover compound interest. In support of its position, Verizon points to the tariff

the parties have agreed to the limitations period other than as discussed in this
opinion.
Each of Peerless’s state tariffs contains similar language except for the tariffs in
Colorado, Ohio, and Virginia, which provide for a rate of 1.5 percent per month, and
the tariff in Kentucky, which provides for a rate of the lesser of 0.000493 per day or
the highest state interest rate. R. 250-1, Oost Decl. ¶ 13.

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Available at http://bit.ly/2KwGU19.
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provisions (1) that charges are “due and payable within 30 days after the date of the
invoice” (Peerless FCC Tariff No. 4, §§ 3.6.2(A), (B)); and (2) that a late payment
charge “shall be due” to Peerless when “any portion of the payment is received by
[Peerless] after the due date” (id. § 3.6.2(D)).
But there is no explicit requirement in the tariff that Peerless had to bill late
payment charges to recover compound interest. See Peerless FCC Tariff No. 4; cf.
Peerless Network of Kentucky, LLC, KY PSC Tariff No. 1, § 3.4.1(B) (requiring
Peerless to “bill all charges incurred”). 6 To the contrary, courts have interpreted
similar language in tariffs to allow compound interest. For example, in Commc’ns
Network Int’l, Ltd. v. MCI WorldCom Commc’ns, Inc., 2010 WL 3959601 (S.D.N.Y.
Sept. 14, 2010), the court allowed compound interest where the language in the tariff
stated: “[i]nterest at . . . (1) the rate of one and one-half (1.5) percent per month . . .
shall accrue upon any unpaid balance commencing thirty (30) days after the date of
the bill first sent for the unpaid amount.” Id. at *9. There, like here, the contract
allowed for late payments if accounts were not paid “within thirty (30) days from the
due date.” 7 The court in MCI WorldCom relied on a Fifth Circuit case interpreting a
contract stipulating that any “unpaid balance shall bear interest monthly,” entitled
the non-breaching party to recover compound interest. Id. (citing Exxon Corp. v.
Crosby–Mississippi Resources. Ltd., 40 F.3d 1474, 1489 (5th Cir. 1995)). Here too, the

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Available at https://bit.ly/2yY6aLY.

See In re Worldcom, Inc., 2008 WL 2466224, at *2 (Bankr. S.D.N.Y. June 18, 2008),
aff’d sub nom. Commc’ns Network Int’l, Ltd. v. MCI WorldCom Commc’ns, Inc., 2010
WL 3959601 (S.D.N.Y. Sept. 14, 2010).
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plain language in the tariff allows Peerless to collect late payment charges at 1.5%
per month when a payment is not received by the due date. See also Phibro Animal
Health U.S., Inc. v. Cornerstone AG Products, 2006 WL 3733022, at *3 (D.N.J., Dec.
18, 2006) (term stating that “service charge of 2% per month will be made on all past
due balances of the maximum applicable by law” allowed compound interest because
the term “past due balance” implied an amount that could include charges other than
simply the original invoice amount).
Equitable considerations further support allowing Peerless to recover
compound interest. Compound prejudgment interest is the norm in federal litigation
because it more readily ensures complete compensation to a harmed party. See
Tabacalera Contreras Cigar Co., 325 F.3d at 937-38; CIT Commc’ns Fin. Corp. v. WesTech Automation Sols., LLC, 2011 WL 1807041, at *2 (N.D. Ill. May 11, 2011) (“Our
Court of Appeals’ observation that compound interest more fully compensates the
plaintiff, holds true for federal and state law claims alike.”). As the Court described
in its previous order, Verizon engaged in self-help by withholding payments under
Peerless’s tariff for over six years without filing objections with the FCC or the courts
to challenge the tariffs. R. 243 at 39. Peerless did not receive its billed switched access
service charges during that time and was denied use of that money. Accordingly,
compound interest is appropriate to fully compensate Peerless.
III.

RULE 54(B)
Finally, Peerless asks the Court to enter a final appealable order on Counts I

through V and Count XI under Fed. R. Civ. P. 54(b). “When an action presents more

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than one claim for relief . . . or when multiple parties are involved, the court may
direct entry of a final judgment as to one or more, but fewer than all, claims or parties
only if the court expressly determines that there is no just reason for delay.” Fed. R.
Civ. P. 54(b); Curtiss–Wright Corp. v. General Electric Co., 446 U.S. 1, 8 (1980). The
Court’s previous order, R. 243, and this order, resolve all of Peerless’s claims. All that
remain are Verizon’s counterclaims, which seek to adjudicate different issues and
which the Court has stayed pending a referral to the FCC. Because there is no just
reason for delay, the Court enters final judgment in favor of Peerless on Counts I
through V and Count XI.
Conclusion
For the foregoing reasons, the Court grants Peerless’s motion for entry of final
order and Rule 54(b) judgment on Counts I through V and XI (R. 248) and awards
Peerless $48,456,131.66.
ENTERED:

Honorable Thomas M. Durkin
United States District Judge

Dated: July 27, 2018

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